One of the major boosts the cryptocurrency market has been waiting for is the Bitcoin ETF approval. Experts believe that this move by the SEC is going to be a real game changer. However, the Chairman of the United States Securities and Exchange Commission, Jay Clayton, who happens to be the one who will determine if Bitcoin ETF gets approved, recently talked about his concerns for the industry. According to him, these issues must be addressed before he would comfortably approve the Bitcoin ETF.
What Is Wrong With The Cryptocurrency Industry According To Jay Clayton
The first problem Clayton noted was the lack of market surveillance. According to him, the fact that most cryptocurrency exchanges don’t have a consensus with stock exchanges when it comes to market surveillance tools makes it difficult for investors to have a fair assessment of the price of BTC. In his words:
“We have seen some illegalities around digital assets that make you surprised. We are concerned with investors and its important that the assets underlying the ETF has good custody so they don’t suddenly disappear.”
Bitcoin (BTC) Price Today – BTC / USD
What he was trying to say was that there aren’t enough custody options for Bitcoin for the SEC to approve the Bitcoin ETF. He continued:
“Investors expect that trading a commodity that underlines an ETF makes it free of things like manipulation. This is an issue that must be addressed before I will be comfortable with approving Bitcoin ETF.”
There a monitoring tool known as ‘surveillance’ that the Nasdaq and the New York Stock Exchange use to prevent manipulative activity as well as investigate them on exchanges. Clayton says that these sort of safeguards don’t exists in all cryptocurrency exchanges.
Custody Services Must Improve
One of the reasons why the cryptocurrency market did not see as many institutional investors as expected is that there aren’t enough avenues for them to safely store their digital assets. Apart from the issue of price volatility, investors are exposed to high risk of theft in this current market. There are a handful of cryptocurrency custody solutions available for investors today while some are on the way. However, Clayton doesn’t believe the solutions available at this time are enough.
Another issue he addressed was initial coin offerings that share properties with security assets. In his words:
“You should just know that you’re starting with a securities offering and you are subject to security laws”.
In June this year, Clayton specifically said that the US SEC is not going to give any special considerations to ICOs that are securities. It defined what a security is and said that the securities market in the United States is the envy of the world thanks to the current rules the SEC put in place.
At the time, he said that Bitcoin (BTC) and Ethereum (ETH) are not securities but he didn’t say anything about XRP and that has left the Ripple community rather anxious. However, the status of an asset is subject to the Howey Test. This is in line with the ruling of the 1946 United States Supreme Court definition of securities. A Security is an investment of money which is made with the expectation of profit that will most likely be generated by the effort of others. The money must be invested through a common enterprise.